How to Build an Emergency Fund

In today’s world, in American and elsewhere, most people live “hand-to-mouth” or week to week. That means the average person earns just enough money to meet his or her expenses before the funds run out and the process repeats itself the following week … or month.

It’s no secret that the cost of living has gone up dramatically over the last twenty years or so, but income has edged up much more slowly. As such, the vast majority of people find it difficult – perhaps even impossible to save money or to “put away cash for a rainy day.” And if you can’t build an emergency fund, you become extremely vulnerable to the unexpected.

If something unforeseen happens – an accident that damages your car and causes you physical injury … an unexpected illness followed up by a hospitalization … costly home repairs … or just about anything else you can find yourself in financial distress – swamped with bills you can’t pay.

Call it a bleak picture, and it is, but it doesn’t have to ever get to that point. You can take steps, now, to build an Emergency Fund that will enable you to pay for the unexpected things that come up in everyone’s life.  And it alls starts with establishing a budget. Here is what you need to do.

Figure out your monthly net income and your monthly fixed overhead. Subtract one from the other and you know how much money you have left. Let’s say, for the sake of argument that you remain with $100 a week after setting aside funds for your fixed expenses. That’s $400 a month. That’s money you’re going to use for transportation, food and entertainment. DON’T USE ALL OF IT. Set aside $25 a week … or even $50, if possible. Place that money in an interest-earning bank account – and don’t touch it. You are now creating your very own Emergency Fund.

Here’s something else you can do. Take on a second job. It doesn’t have to be for a lot of hours … or even for five days a week. Work weekends or one or two nights each week. The extra income you make can go into your pocket for entertainment (some of it, anyway) and into your bank account to build your Emergency Fund (lots of it, hopefully).

One more thing: most people have lots of spare change in their pockets at the end of a long day. Start saving your loose change … it adds up quickly. When you have a substantial amount, convert it to paper money and deposit it into your ever-growing Emergency Fund checking or savings account.

It grows quickly. And you can never have too much money set aside for unexpected expenses. Start saving today and don’t stop. Turn it into a habit. You’ll be amazed at how quickly it grows into a significant amount of money, cash that will be available to help you in a time of need. Take the first step right now.

Related posts:

1. Money Bible Verses: On Saving and Emergency Fund
2. How to Control Your Spending
3. The Best Ways to Save Money
4. Tips on How to Achieve Financial Freedom
5. What is a Mutual Fund? Risks and Advantages